Mercury Retrograde in Libra: Wachovia to Merge with Wells Fargo; Citigroup and FDIC Feel Slighted

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With Mercury retrograde in Libra (September 24 – October 15, 2008), the sign of partnerships, Wachovia (WB) decided to change partners and return to the arms of its original suitor, Wells Fargo (WFC).

After Wells Fargo told Wachovia on Sunday the bank needed more time to consider making an offer to Wachovia, the FDIC got antsy and told Wachovia CEO Steel that it was taking control of the situation. By the early morning hours of September 29, a shotgun marriage had been arranged for Citigroup (C) by the FDIC to buy most of Wachovia’s banking operations in a $2.16 billon all stock deal (about $1 a share) that would have gone to Wachovia Corporation (Wachovia Securities, A.G. Edwards, and Evergreen), not Wachovia shareholders. The FDIC announced it had “entered into a loss sharing arrangement on a pre-identified pool of loans. Under the agreement, Citigroup Inc. will absorb up to $42 billion of losses on a $312 billion pool of loans. The FDIC will absorb losses beyond that. Citigroup has granted the FDIC $12 billion in preferred stock and warrants to compensate the FDIC for bearing this risk.” Without FDIC backing, Citigroup refused to do the deal.

This morning Wells Fargo announced that it would acquire all of Wachovia in a $15.1 billion all stock deal that based on Wells’ closing price yesterday, would give Wachovia shareholders $7 a share of Wells Fargo stock. No government assistance is involved in this deal. (Warren Buffett is a major Wells Fargo shareholder.)

Mercury rules contracts. It's best to avoid entering into contractual agreements when Mercury is retrograde as errors and omissions are greater. Contracts are more likely to be broken, or require major revisions. Libra represents our relationships with others, especially business or romantic partnerships as Venus-ruled Libra rules marriages.

Now Citigroup is saying that Wachovia’s merger with Wells is a breach of contract. The CEOs of Wells and Wachovia stated on the Wells conference call this morning that a merger agreement between Wachovia and Citigroup wasn’t consummated. Citi just issued a statement claiming Wachovia breached an “Exclusivity Agreement” between them. Scroll down to the third paragraph: “Citi was negotiating in good faith and nearly completed the definitive agreements required to consummate the Citi/Wachovia transaction that was announced on Monday.” “Nearly” is obviously not the same as “completed.” There may have been a marriage ceremony, but the marriage certificate was never signed. Venus transiting Scorpio reflects that Citi and Wachovia never made it to the bedroom to consummate the marriage.

Not only do Wachovia shareholders benefit from the Wells deal, but so does every taxpayer in America. Which is why it’s somewhat perplexing that FDIC Chairwoman Bair would issue this statement:
"The FDIC stands behind its previously announced agreement with Citigroup. The FDIC will be reviewing all proposals and working with the primary regulators of all three institutions to pursue a resolution that serves the public interest."

Bair’s remarks are yet another bizarre example of this Administration’s overwhelming need to put the ideology of moral hazard ahead of pragmatic (and in this instance) free enterprise solutions. Isn’t she aware that Wells has already acquired 39.9% of Wachovia’s preferred shares?

Related Posts:
“CNBC Reveals The Impact of Mercury Retrograde”, “Libra New Moon Cycle: September 29 – October 28, 2008”, “Libra New Moon Blows Off TARP, Exposing Big Hole in $700B Bailout Bill”, “Negative Return on Investment on Paulson’s Moral Hazard”, “After AIG, Paulson’s Moral Hazard Ends at the Golden Door”, “AIG, Lehman, and Merrill under a Harvest Moon: Parallels to the Panic of 1907”.

1 comment:

sasha_nc said...

Deborah, I have been a long-time customer of Wachovia as well as a penny-ante shareholder. I preferred Wells Fargo from the beginning before the FDIC arranged the marriage with Citigroup.

I have a stellium in Scorpio (Mercury, Neptune, Sun, and Venus). Today, as Mars was forming a conjunction with my Mercury, I called the legal department at Citigroup and the FDIC to let them know where I stood. I also called Wachovia shareholder relations and from the conversation I am not alone in my opinion of the Citigroup offer. Of course, I may be the only one to spit in Citigroup's face, figuratively speaking.